Hindalco Targeted for Rs 1,100 by Emkay Global Financial

Hindalco's Novelis Division Posts Strong Q4 Performance

Emkay Global Financial's research report highlights the impressive Q4 performance of Hindalco's Novelis division, with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of USD459 million exceeding the research firm's estimates. This strong showing can be attributed to the division's ability to improve scrap spreads and implement cost-efficiency initiatives, despite facing challenges from the Oswego fire and tariffs.

Key Drivers of Novelis' Success

Novelis' adjusted EBITDA margin remained robust at USD544 per ton, even after accounting for one-time expenses. This performance is expected to translate into earnings recovery for Hindalco from Q2FY27 onward, driven by several key factors. These include improving scrap spreads, a normalization of the tariff impact, the early restart of the Oswego mill, and the commissioning of the Bay Minette facility in the second half of calendar year 2026.

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Outlook and Leverage Expectations

While leverage may remain elevated in the near term due to pending capital expenditures for the Bay Minette facility, Emkay Global Financial expects the balance sheet to improve following the ramp-up and insurance recoveries. The research firm maintains its BUY recommendation and target price of Rs1,100 for Hindalco.

Leverage Projections

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With Bay Minette commissioning on track for H2CY26 and Oswego operations normalizing, Emkay Global Financial expects leverage to moderate toward approximately 4.0x by end-FY27 and decline further thereafter. The research firm continues to recommend a BUY rating and a target price of Rs1,100 for Hindalco.